October 24, 2014

The Business of Editing: Fee Negotiations (Part I)

(Note: Although this essay is from the perspective of an editor dealing with a publisher or packager, the basic principles of negotiating remain the same regardless of what you do or with whom you are negotiating.)

A common complaint of editors is low fees. I know that the pressure is on for editors to lower their fees, and I also know that fees have been essentially stagnant since the mid-1990s. Contributing to this economic “depression” are the Internet, which has changed the marketplace from local to worldwide, and publishing industry consolidation, which has led to increased outsourcing to the lowest-priced supplier, which has further led to outsourcing to “full-service” packagers who supply production services to publishers and purchase services of freelancers to provide the editorial services.

The problem we face is twofold. First, packagers often bid an editing price without having manuscript in hand. They get a few samples, look them over, and then, expecting to outsource the editorial work, bid a price for editing services that is the maximum price the publisher-client will pay as part of the whole production package. Built into the bid price is an expected profit for the packager on the editing component. For example, to get the publisher’s work, the packager may bid $3.50 a page for editorial work expecting that the maximum it will pay a freelance editor is $3.00 a page (and it may well offer the freelancer even less). (Note that these prices are drawn from air for purposes of discussion and are not being represented as actual pricing.)

The second problem is that the packager’s bid price sets publisher expectations. Knowing that it can send editorial work to a packager and pay no more than $3.50 a page means that when the publisher contracts directly with a freelancer, it already has a ceiling established on what it will pay. Consequently, the freelancer becomes bottlenecked because of pricing established by someone else.

The question becomes: Can the freelancer negotiate a different price?

This three-part essay discusses preparing to negotiate. This essay (Part I) discusses the first three preparation steps: (1) know your required effective hourly rate (EHR); (2) know your churn rate; and (3) establish your workweek parameters. Part II discusses steps 4 to 9: (4) determining what constitutes a page; (5) calculating the project’s size; (6) knowing the schedule the client expects; (7) determining how many editing days you will have; (8) calculating the churn rate that will be required to meet the schedule; and (9) determining what difference editing on weekends and/or holidays will make. Finally, in Part III, we complete the calculations and put together our negotiation package.

Understand that we are speaking of negotiating, which is something quite different from saying to a client, “My minimum price is $4 per page,” and nothing more — basically a take-it-or-leave-it proposition. When negotiating a fee, the editor needs to be able to provide and maintain a justification for the asked for price; that is, there must be some strength to the editor’s position.

Step 1: Know Your Required Effective Hourly Rate

The beginning point always has to be the required effective hourly rate (EHR), which we have discussed numerous times (see, e.g., the essays on calculating fees that begins with Business of Editing: What to Charge (Part I)). Fees come in three flavors: wanted, market, and required. I want to charge a fee of $50 an hour, the market rate is $35 an hour, and I require $42 an hour. (The market rate is the rate the client offers you when the client first contacts you for the project. There is no general “market” rate for editors that can be pointed to as the rate that most editors charge and receive for their services.) If what you want to charge is less than the market rate but more than the required rate, then you should be charging the rate you want. On the other hand, if, as in the example given, what you want and what you require both exceed the market price, you need to have a strong argument as to why clients should pay you above the market.

The problem that most freelancers face is that they do not know what their required EHR is, even though this is the number that, in terms of pricing, they cannot go below, at least not if they want to remain in business and pay their bills. The rate we want should always exceed the required rate, yet I know freelancers who, when they have finally calculated their required EHR were shocked to discover that their wanted rate was below their required EHR. Thus, even if they were able to charge their wanted rate, they would still be losing money.

Step 2: Know Your Churn Rate

This, too, is a subject we have discussed before (see, e.g., Business of Editing: Workdays & Schedules). Each of us works at a different speed. Some of us can provide a high-quality edit at a rate of 10 pages an hour, whereas others can produce the same high-quality edit at a rate of 5 pages an hour. Regardless, we need to know our editing speed — our churn rate.

We also need to know the number of hours a day we can effectively edit; that is, the maximum number of hours we can work and produce a high-quality edit. In my experience, and in speaking with colleagues, the consensus is that editors generally can edit effectively for a maximum of 5 hours a day, after which quality starts to decline.

If we can churn 10 pages an hour for 5 hours a day, it means we can edit a maximum of 50 pages in a day, assuming that there is nothing in the manuscript that alters this rate, such as hundreds of references of which few are complete or correct.

Step 3: Establish Your Workweek Parameters

It is important (also as discussed before) to have an established workweek. Many editors work whatever is required to complete the work, but that is different from establishing a set workweek. For example, my established workweek is Monday to Friday excluding holidays. My established workweek does not include Saturday, Sunday, or Thanksgiving. In fact, for some holidays, like Thanksgiving, the holiday days off include the day before the holiday through the weekend.

It is important to establish a workweek and to let clients (and potential clients) know what it is. Whenever I give a quote, I make it a point to tell clients what my workweek is. I emphasize to clients that I do not work on weekends or holidays. And when a holiday is coming up, I let clients know that my office will be closed, although I might check email. If I didn’t have set hours and workdays, clients would assume that I work days, nights, weekends, and holidays and assume that no special fee is needed to get me to work those hours.

These are the first three steps in negotiation preparations — know your required effective EHR, know your churn rate, and establish workweek parameters. Part II tackles steps 4 through 9.

[…] Part I addressed the first three preparation steps: (1) know your required effective hourly rate (EHR); (2) know your churn rate; and (3) establish your workweek parameters. Part II took us further along the preparation path, getting us through six additional steps: (4) determining what constitutes a page; (5) calculating the project’s size; (6) knowing the schedule the client expects; (7) determining how many editing days you will have; (8) calculating the churn rate that will be required to meet the schedule; and (9) determining what difference editing on weekends and/or holidays will make. Now, in Part III, we complete the calculations and put together our negotiation package. […]